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Fortune 500 Daily & Breaking Business NewsTue, 31 Mar 2015 22:02:57 +0000enhourly1http://wordpress.com/http://1.gravatar.com/blavatar/dab01945b542bffb69b4f700d7a35f8f?s=96&d=http%3A%2F%2Fs2.wp.com%2Fi%2Fbuttonw-com.png » Publishing - Fortunehttp://fortune.com
Fortunehttps://s0.wp.com/wp-content/themes/vip/fortune/assets/images/fortunelogo.pnghttp://fortune.com25040Facebook looks to host news content, without ‘devouring the Internet’http://fortune.com/2015/03/24/facebook-news/
http://fortune.com/2015/03/24/facebook-news/#commentsTue, 24 Mar 2015 14:16:39 +0000http://fortune.com/?p=1049838]]>In the coming months, Facebook FB will begin a test run of hosting content from news organizations including the New York Times, BuzzFeed and National Geographic within its site, the New York Times reports. This would be a change from the current way articles spread across Facebook: via links to the news organizations’ own websites.

This strategy was first reported on last October, when David Carr of the New York Timeswrote that Facebook went on a "listening tour" with publishers to discuss hosting their content and sharing advertising revenue. Carr compared Facebook's relationship with publishers to "that big dog galloping toward you in the park." The idea being, you don't know whether to welcome it or fear it. The benefits of such an arrangement include faster loading times for publishers, and getting their content to users faster. But Carr noted that many publishers are wary of giving Facebook the level of control over their brand and advertising dollars that hosting their stories on the site would entail.

Speaking at the Code/Media conference in Laguna Niguel in February, Facebook chief product officer Chris Cox moved to assuage those fears, saying, "We don’t want to try and devour and suck in the Internet."

Cox was pressed to discuss the sometimes scary amount of power that Facebook, with 1.4 billion monthly active users, wields over publishers and app makers. Every time Facebook changes the algorithm of its News Feed, it sends a ripple effect over the media landscape. From the outside, it appears that Facebook has the power to elevate publishers and app makers that it likes, and destroy the ones it doesn’t.

But Cox insisted that any change Facebook makes to its algorithm is dictated by user data, not by executives. Facebook is so obsessed with figuring out what users like and don't like that the company hired a team of people in Knoxville to use Facebook all day, while a team studies their actions.

As Cox spoke, murmurs of dissent bubbled up. “Tell that to the social news apps,” someone grumbled.

In 2012, Facebook de-emphasized social reader apps from the Washington Post and the Guardian, which were admittedly clunky and spammy. The publications pulled the apps. Likewise, Facebook de-emphasized notifications from Zynga ZNGA, which sent the company scrambling to move its users to mobile. Most recently, Facebook declared war on click-bait headlines, which it defines as any link with a headline "that encourages people to click to see more, without telling them much information about what they will see." This change has been attributed to major declines in traffic at fast-growing sites like Upworthy. Facebook did the same thing with apps that automatically shared passive activities like music listening or workouts.

Facebook isn’t the first company to wield distribution power over publishers. In the early days of the Web, Yahoo YHOO and AOL AOL controlled the Web’s traffic, and publishers optimized their content to be picked up on their homepages. Then Google GOOG became the primary way people navigated the Web, and publishers poured resources into search engine optimization. Now, social media dominates the Web, and Facebook is the 800-pound gorilla. Publishers must to decide if they're willing to hand Facebook that kind of control.

More details of the plan to host media content may be revealed at Facebook's developer conference, F8, this Thursday.

]]>http://fortune.com/2015/03/24/facebook-news/feed/0US-IT-INTERNET-FACEBOOKgriffitherinThe business of recommendations is huge: Taboola raises $117 millionhttp://fortune.com/2015/02/04/taboola-raises-117-million/
http://fortune.com/2015/02/04/taboola-raises-117-million/#commentsWed, 04 Feb 2015 14:00:48 +0000http://fortune.com/?p=974601]]>The digital publishing business is desperate to find a business model that works. So far, banner ads are annoying, programmatic ads are a race to the bottom on pricing, and native ads are an unscalable, ethically murky minefield.

Recommendation widgets, the little boxes of “content from around the web” at the bottom of many news articles, have plenty of shortcomings, too. (Many think they point readers to unsavory content.) But they work, and publishers are happy to make money from their audience clicking on stories from other sites. For example, Time Inc., Fortune's parent company TIME, recently signed a multi-year deal worth $100 million with content recommendation startup Outbrain. Its modules appear adjacent to and beneath this very article.

The business has become incredibly competitive. Last year, Yahoo YHOO launched a product called Yahoo Recommends that Hearst, CBS Interactive, and Vox Media are now using. AOL AOL has a product called Gravity. Google GOOG is reportedly beta-testing its own content recommendation service for publishers. Outbrain, backed by $99 million in venture funding, was set to hit $200 million in revenue last year. And the market is littered with dozens of smaller players, like Adblade, Zemanta, and Zergnet.

Today, Taboola, a content recommendation startup, announced a major funding round to help it compete. The company raised $117 million in a round led by Fidelity Investments. Existing investors Marker and Steadfast Capital invested, as did strategic investors Comcast Ventures, Groupe Arnault, Yahoo Japan, Advance Publications (parent company of magazine publisher Cond? Nast), and Carlo De Benedetti, chairman of Italian Media conglomerate Gruppo Editoriale L’Espresso. Taboola has raised $157 million in venture funding to date.

Last year Taboola generated more than $200 million in revenue. The company’s recommendations reach 550 million people each month, which is 86% of desktop Internet users in the U.S. Its fourth quarter marked the company's sixth consecutive profitable quarter, according to CEO Adam Singolda. "This was all done with $40 million of capital raised," he says.

With a huge pile of cash from both strategic and financial advisors, Taboola will expand international growth--it has partnered with new investor Yahoo Japan--accelerate the development of its content personalization technology, and continue to hunt for acquisitions. (Last year the company acquired Perfect Market, a programmatic advertising technology company.) Taboola will build out analytics tools to help newsrooms better engage with their audiences as well, Singolda says. The company counts USA Today, Business Insider, Chicago Tribune, FOX Sports, and The Weather Channel among its clients.

]]>http://fortune.com/2015/02/04/taboola-raises-117-million/feed/0Taboola CEO Adam SingoldagriffitherinHistoric Charlie Hebdo issue selling for $1,100 on eBayhttp://fortune.com/2015/01/14/charlie-hebdo-issue-ebay/
http://fortune.com/2015/01/14/charlie-hebdo-issue-ebay/#commentsWed, 14 Jan 2015 17:54:04 +0000http://fortune.com/?p=944404]]>This post is in partnership with Money. The article below was originally published at Money.com

By Brad Tuttle, Money

Within days of a grisly massacre that killed 12 at the offices of Charlie Hebdo, the surviving staffers published a new issue of the French satiric newsweekly. To say copies are in high demand is understating things: Millions of copies have sold out in France at the newsstand price of EUR3 (about $3.50), and around the globe buyers seeking print editions of the historic issue have turned to online auctions, with many bidding 100 or more times the list price.

Charlie Hebdo, known for publishing cartoon versions of the Prophet Muhammad and mocking various religions (among other institutions), was reportedly targeted by extremist gunmen seeking "vengeance for the Prophet." The post-massacre edition of the newsweekly again features a cartoon version of the Prophet--an act that some consider deeply insulting to Islam--along with the words "Je Suis Charlie" (I Am Charlie) and "Tout Est Pardonne" (All Is Forgiven).

Normally, Charlie Hebdo distributes around 60,000 copies per week. For the latest edition, the print run was hiked to 3 million and has since been upped to 5 million. One week after the killing, people in France waited in long lines early in the morning to buy multiple copies of the new Charlie Hebdo. Within hours of those millions of copies selling out, issues began turning up on eBay.

On Wednesday the (U.K.) Independent reported that online auction bids have passed ?500 ($760) at U.K. and U.S. versions of the auction site. The Hollywood Reporter noted that dozens of bids at one U.K.-based auction pushed the price of one copy up to ?760, or $1,153. CNBC rounded up various copies of the new Charlie Hebdo on eBay listed at "Buy It Now" prices of EUR20,000, EUR50,000, even EUR100,000. At today's exchange rates, those asking prices are the equivalent of around $23,500, $60,000, and $118,000, respectively.

Starting at the end of this week, a few hundred issues will be go on sale in the U.S. at a select few locations--mostly in big cities such as New York and San Francisco. Presumably, the few sellers with copies will have no trouble finding interested buyers. Charlie Hebdo isn't normally distributed in the U.S., but as USA Today reported, magazine sellers all over the country are trying to find ways to get their own copies that can be put up for sale.

]]>http://fortune.com/2015/01/14/charlie-hebdo-issue-ebay/feed/0Global Reaction To The Terrorist Attack On French Newspaper Charlie HebdohuddlestontomA new twist in the war over online content recommendationshttp://fortune.com/2014/12/15/nrelate-outbrain-taboola-content-recommendation/
http://fortune.com/2014/12/15/nrelate-outbrain-taboola-content-recommendation/#commentsMon, 15 Dec 2014 13:29:37 +0000http://fortune.com/?p=895750]]>Online, articles and videos and everything else vie for your limited attention--making the recommendation an important tool for publishers to cut through the noise. Five years ago, a new crop of Internet startups appeared, using algorithms to recommend relevant content on behalf of web publishers. Today, content recommendations is an industry in its own right.

Just about every major web publisher buys and sells traffic through "recommendation" widgets that run beside the articles they publish. In some cases, it’s a way for publishers to further distribute their articles and videos. In others, it’s a way for them to monetize their distribution of someone else’s.

The industry is led by two well-funded New York startups, Outbrain and Taboola, that are each on track to bring in an estimated $200 million in sales this year. Their rivalry has intensified in recent months. In August, the CEO of Outbrain offered some choice words to his competitor in these pages. Dozens of smaller players have also entered the fray: Adblade, Zemanta, Zergnet.

The buzz around the category has captured the interest of big Internet companies. Earlier this year Yahoo YHOO launched its own content syndication competitor, Yahoo Recommends. The company's product is already used by media companies old and new including Hearst, CBS Interactive, and Vox Media. Rumors have since surfaced that Google GOOG also plans to launch its own content recommendation service.

Last week, one of the larger competitors in the category, nRelate, suddenly announced it would shut down at the end of the year. It came as a surprise--the InterActiveCorp IACI property appeared to be a success, having cornered about one quarter of the market, according to the data analytics company Datanyze. (The company served more than 10,000 websites.) On its heels? Outbrain, followed by Taboola. A dozen smaller competitors fill out the remaining 40%.

The market for content recommendations is still extremely small and fragmented. Only 2% of the Web’s largest sites use a content recommendation widget. If the largest player pulls out, what does it mean for a category that’s still seen as emerging?

There are clues. nRelate’s market share drops significantly as you move closer to the top of the list of the Web’s largest sites--meaning the biggest sites, which are most likely to spend the most money on recommendations, were choosing Outbrain and Taboola over nRelate. “It’s my guess that very few ad dollars are being spent on anything below a 100,000 Alexa rank,” says Sam Laber, director of marketing at Datanyze, referring to the ranking of the largest websites by traffic by Alexa, an Amazon-owned web analytics company.

With one competitor out of the way, Outbrain and Taboola continue to battle for dominance. They have both raised lots of venture money--$99 million for Outbrain, $40 million for Taboola. Eventually they'll need an exit strategy. Either the startups sell to a large public tech company like Yahoo or Google--which again, are both working on their own versions of the concept--or they go public themselves, leaving Yahoo and Google as threats.

It is telling that, in recent months, Outbrain and Taboola have engaged in a land grab to secure large, multi-year contracts with publishers. For example, Outbrain announced an exclusive deal worth $100 million over three years with Time Inc. TIME, which publishes Fortune. The deal clearly demonstrates Outbrain's desire to lock in publishers as customers before Google can snatch them away. That way, when Google decides to formally launch its own content recommendation engine, it will find all of its potential customers locked into multi-year contracts, leaving it and Yahoo with two paths from which to choose: acquire your way in, or retreat.

]]>http://fortune.com/2014/12/15/nrelate-outbrain-taboola-content-recommendation/feed/0Taboola ad unit VarietygriffitherinEvan Williams: On billionaire-backed journalism, Shanley Kane, and the problem with vanity ad metricshttp://fortune.com/2014/12/15/qa-evan-williams-medium/
http://fortune.com/2014/12/15/qa-evan-williams-medium/#commentsMon, 15 Dec 2014 12:03:36 +0000http://fortune.com/?p=903865]]>Many people use the newish blogging site Medium each day, but almost as many of them are confused about what, exactly, it’s supposed to be. It is a publishing tool--a very pretty one at that, with lots of clever bells and whistles. It’s also a publisher that pays professional editors and writers to commit various acts of journalism. (The company has launched or acquired six different sub-publications: Matter, Cuepoint, Backchannel, Re:form, Vantage, and The Nib.)

Medium was co-founded by Evan Williams, better known as a co-founder of Twitter, in 2012. (His Medium co-founder, Biz Stone, was also a Twitter co-founder.) The San Francisco company has raised $25 million in venture capital and hired 75 employees. Medium’s namesake website is slick, and feels like a fancy plaything for web-savvy tech and media types--the early adopters. The company has been plagued by the question of whether it is a platform or publisher. (Some coined a new term to explain Medium: It is a platisher.)

Williams wants to set the record straight: Medium is a publishing platform. He suspects that its plentiful professional content “may have set the bar too high” for the user-generated content he hopes will appear on Medium. Over time, Williams believes Medium will become a destination for both casual and serious content.

Medium is what Blogger, the publishing platform Williams helped create and sell to Google GOOG in 2003, could have been had social media existed. (For the record, Blogger’s Blogspot.com remains the 17th-most trafficked Web domain in the world. Williams attributes the continued popularity to “a very, very long tail--and Google search traffic.”)

Williams has applied the lessons he learned at Twitter TWTR about networks and interconnectedness to Medium’s strategy. Though it is still nowhere near mainstream adoption--nor doing much by way of monetization--Medium appears to bring a fresh approach to publishing. It’s something the media industry cannot afford to ignore.

In a recent interview with Fortune, a small part of which was published last week, Williams discussed Medium’s vision and why he doesn’t mind that it isn’t yet mainstream. He also addresses the heated debate over Silicon Valley’s role in journalism as well as that tricky platform-publisher identity crisis.

One final note: I've added some low-tech footnotes to our conversation. Citations appear in brackets in the text and at length at the bottom of the page. The interview has been edited for length and clarity.

Fortune: There has been a lot of animosity on the Internet lately toward people who have made a lot of money in Silicon Valley and decided to invest it, sometimes controversially, in journalism. You have Chris Hughes at The New Republic [*1] and Pierre Omidyar with First Look Media [*2]. You're one of those guys, so I'm curious how you view that.

Evan Williams: I think I'm glad I didn't buy one! Although Pierre didn't buy one. I think it's tricky for sure to build a company with both of these cultures and DNAs. The biggest difference might be that we are very clearly balanced toward being a technology company. Of seventy-five people [on staff], the majority of them are building Medium the product.

We're trying to do something different. All 15 of the editorial people we have in-house really get what we're trying to do and we've filtered for that. I'm super grateful for the people we've been able to hire. Steven Levy [*3] could have went anywhere. He came to us because he liked the vision and what we're trying to do. It wasn't us going to him and saying, "We're going to pay you lots of money to do something you've always done." It was him, saying, "I want to do something different, I want to be part of an adventure, and I want to help figure this out." A lot of them come from the traditional world and they signed up because they see things need to change and think, "Let's figure it out together." You feel that spirit at Medium.

One thing people from the editorial side get nervous about is that, when things go sideways from an editorial point of view, a Silicon Valley person might not know how to handle it, or wouldn't handle it the same way that, say, an old school editor would.

I feel like my background is designed perfectly to handle these things. We've had some controversy--not a lot--but we've had some. Matter published a story about Shanley Kane [*4], who is a pretty controversial character in Silicon Valley, and it caused a lot of angst. Way before the story was published, she started complaining about it and we were like, "What do we do?" We have a lot of female engineers and we pride ourselves on diversity in our engineering team. We want to create a great place to work for them and they were getting flack from people in their community, and so that was a new sort of problem that we created--that the editorial created--for the engineering side. And people were like, "Oh we shouldn't be publishing that" and we were like, "We should publish whatever we think is worth publishing."

The reason I think I'm prepared for this is, with Blogger and Twitter, I spent a decade basically enabling people to publish whatever they want as long as it wasn't stolen or violating any laws. People on my team were very involved in defining content policy at Google and then at Twitter. We've always been on the pretty extreme end of freedom of speech. We value that a lot. It would be a pretty extreme case to get in and say, "Oh, okay, you can't publish that."

But would you protect somebody if they published something libelous? Are you responsible for that, as a company that has contracts with writers, or is it the sole responsibility of the person who wrote it?

[Williams defers to Sarah Agudo, Medium's head of legal, who was also in attendance.]

Sarah Agudo: We protect people who we hire. We have a pretty clear Section 230 on user-generated content. [*5] We're not liable for any of that protection, but for writers that we hire, we're responsible.

So you're hiring all these editors now [*6], who are creating channels and paying writers. But you're primarily a technology platform. What is your vision?

Williams: The vision is to create the best publishing platform there is--a place where the whole is greater than all of the parts. Our core thesis is by connecting things more closely together, both stories and ideas, and readers and writers, that more value can be gained by everyone.

We wanted to create a place where great stories and ideas thrive, that was really a platform that enabled anyone to publish whatever they wanted, and that would be as streamlined as much as possible and they'd get the feedback that they were looking for.

If you think of the software world, if you're Microsoft or Apple, you want people to develop software for your platform, but that doesn't mean you don't [develop software] yourself.

We wanted to get great content on the platform so it would start the flywheel turning and legitimize it as a place to write and model what Medium was for, rather than just throwing open the doors and just hoping that good stuff shows up. Communities on the Internet have as much to do with what the early users do as what the core functionality allows. We didn't want to just leave it up to whatever happened.

You wanted to set an example.

We wanted to set an example. We set a high bar, because we had a lot of professional content and maybe we set too high a bar. Because even though Medium is supposed to be the easiest place to publish, there is a bit of an intimidation factor that we hear because we maybe set too high a bar.

But I think that will change over time and we'll have a much wider variety of stuff. The spectrum that I think about a lot is casual to serious, so even the same person could do something that's very casual, like I'll throw a thought out there, or I'll spend a week on something and have it edited and do research. Medium is meant to be all those things.

There are six Medium-owned publications on the platform now. Will you keep paying contributors and starting new publications?

We'll keep expanding, but not at the rate that the platform as a whole expands. We may pay for a piece, but it generates a whole conversation. It's not just people consuming or commenting, it's people reacting in a bigger way. We want to figure out what is the model for professional content. Not everything is going to happen organically. Original reporting doesn't really happen with user-generated content, and a lot of these pieces have high production values and fact-checking and illustrations. We want that stuff and we think there is a business in that stuff.

If we can figure out how to build these publications on the platform, we think there are a lot of efficiencies, versus building them on the Web standalone somewhere, or God forbid trying to create your own app. Then we won't be the only ones creating them on Medium.

Are you close to fulfilling your vision for Medium?

Until we have a critical mass of good stuff, no one’s going to browse Medium or use our app. In the last few months, we feel like we've hit a new threshold and can work on discovery more.

What's the threshold?

It's not a quantitative one, it's just a feeling that there's tons of good stuff on there and we could do a better job of exposing that to people and drive discovery.

We know most people aren't going to sit down and write thoughtful articles, and that's fine. We don't aim to have most people writing on Medium, but we'd also want people to do more than consume, ideally. At minimum, that could be recommending the story. The authors get the feedback. It could be writing notes.

How many people are logging in and interacting now?

It's definitely a small minority compared to the people who are reading things. We want to drastically increase that.

Does Medium have anything close to mainstream recognition? Is that important to you?

No, it's so early for Medium. Tens of millions of people have come by Medium and not realized they're on Medium.

There are other people that are aware of Medium and know what it is. As you would expect, it's the media world and technology world, which doesn't bother me that much. I'd rather create a great place for those people who are thinking and creating things that are affecting everybody else than try to go super wide. That's why we're not focusing on creating the most viral content possible. Eventually we want a wide audience, but we want depth as much as we have breadth.

Twitter wasn't that much different for a long time. It was an obsession of the tech and media world long before it was mainstream.

The first couple of years at Twitter, people talked about it so much that we never shared any numbers because it was like [in a stage whisper], "Don't tell anyone, it's small." And then it really caught up and surpassed expectations for awhile and we still had some skeptics in Silicon Valley saying, "Well, no one uses Twitter except for Silicon Valley." And by that time we knew there were millions of people in Japan and lots of people in the Midwest, and that's how these networks grow. By definition they're concentrated, and you just add more concentrated networks ideally, rather than try to boil the ocean.

So, can you share any stats about pageviews, or users, or unique visitors?

The numbers we pay the most attention to goes back to the question of depth versus breadth. [*7] This isn't an excuse for having low active user numbers [*8], but the main thing we measure is time spent on stories. I think it's the best proxy for value. It's not a perfect proxy, but in a world of infinite media to consume, if someone is actually spending time reading something, that's pretty meaningful, so we aim to optimize for that.

I would rather have fewer people stop by and read something for five minutes that makes them think than a million people stop by for five seconds because of a catchy headline.

The optimistic part of the message is that advertisers get this too. Brand advertising has never worked on the Internet anyways, because banner ads don't work. So whatever the form factor is, people have to be actually engaged in something for it to be meaningful.

So do you want to make money on Medium some day?

Medium is a for-profit entity. Definitely we will make money. We've done some stuff that we've gotten paid for. One of our publications, Re:form--it's based on design--is actually sponsored by BMW. We sold it based on time spent on the articles. It's not a traditional advertising metric.

How much does a minute of advertising on Medium cost?

I don't know. We're experimenting. The way I think about this in contrast to Twitter is that we want the user-generated content, but we also want the professional content. Professional content needs paid for. The sooner we get money flowing through the system and allow other people to make money, that drives more professional content. That's not necessarily our business model for the whole thing, but it is useful now to drive more good stuff.

[*4] By Elizabeth Spiers, published in July. Prior to publishing, Bobbie Johnson, an employee of Medium and the story's editor, posted an explanation of Kane's objections to the story, noting that Medium would publish the story nonetheless.

[*7] Williams also commented on the topic of “depth versus breadth” in the context of Instagram surpassing Twitter in terms of monthly active users. That story appears here.

[*8] Past reports have cited as many as nine million monthly unique visitors.

Connected is an interview series with leaders of innovative organizations. Conversations are condensed and edited.

]]>http://fortune.com/2014/12/15/qa-evan-williams-medium/feed/0WIRED Business Conference: Think BiggergriffitherinSecond Bite: Can Apple clear its name in the ebooks drama?http://fortune.com/2014/12/02/apple-ebooks-litigation/
http://fortune.com/2014/12/02/apple-ebooks-litigation/#commentsTue, 02 Dec 2014 12:00:05 +0000http://fortune.com/?p=885916]]>When Apple goes before a federal appeals court on Dec. 15, trying to overturn the ebooks price-fixing judgment the Justice Department won against it in July 2013, there will be an elephant in the room.

That would be Amazon, the much admired and greatly feared -discounter, which is not a party in the case. Yet the unposed question hovering over the proceedings will be: Did the regulators target the right bully?

The case stems from events that occurred five years ago, when Apple was preparing to launch its first iPad. Apple's negotiator extraordinaire, Eddy Cue, signed up five of the then six major publishing houses to start selling ebooks through what it would call the iBooks Store.

Apple AAPL was breaking into a market then dominated by Amazon, which had an 80% to 90% market share--monopoly power in almost anyone's book. The iPad's new color touchpad e-reader would compete with Amazon's Kindle 2, a black-and-white, text-only, single-use device that advanced pages with a button. So far so good.

But when the curtain rose on the iBooks Store on April 3, 2010, so did prices industrywide for most new-release ebooks, to the tune of about 17%.

That dramatic price rise--and a letter Amazon AMZN wrote to regulators two months earlier--led the Justice Department and 33 state attorneys general to sue Apple and five publishing houses for horizontal price-fixing in violation of the -Sherman Act. In July 2013, after a three-week trial, U.S. District Judge Denise Cote of Manhattan ruled against Apple. (The publishers settled before trial.)

This is the stain on its reputation that Apple hopes the appeals court will wash away. The man at the center of the dispute, Apple's Cue, 50, has agreed, in a Fortune exclusive, to grant his first press interview on the subject. An Apple lifer since he was 24, Cue now oversees iCloud, Siri, and all the company's online stores. It was Cue who conducted the negotiations that led to the launch of the iTunes store in 2003, the App Store in 2008, and Apple's new digital--payment product, Apple Pay, in October. And it was he who negotiated Apple's entry into the ebooks market in 2010.

"Is it a fact that certain book prices went up?" asks Cue. "Yes. If you want to convict us on that, then we're guilty. I knew some prices were going to go up, but hell, the whole world knew it, because that's what the publishers were saying: 'We want to get retailers to raise prices, and if we're not able to, we're not going to make the books available digitally.' At the same time, other prices went down too, because now there was competition in the market."

Many are surprised Apple didn't settle long ago. The case seems to be more about reputation than money. (Under a conditional settlement worked out in June, if Apple loses the appeal, it will pay $450 million in damages and attorney fees. If it wins, it pays nothing.)

"We feel we have to fight for the truth," says Cue. "Luckily, Tim feels exactly like I do," he continues, referring to Apple CEO Tim Cook, "which is: You have to fight for your principles no matter what. Because it's just not right."

It's a risky choice, since a loss would only set the stain. "Apple has an uphill battle," says Herbert Hovenkamp, a law professor at the University of Iowa and co-author of a 22-volume antitrust treatise. "There was lots of evidence in the record, the judge looked at it, and she agreed with the government. Fact-findings get reviewed under a deferential standard. You pretty much have to accept them." (It was a bench trial, meaning that Judge Cote herself, not a jury, was the fact-finder.)

Still, the issues are perplexing, and Apple has a fighting shot. Did prices go up because of price-fixing? Or did they go up, rather, because once Apple entered the market, the publishers finally had an alternative to selling through Amazon on whatever terms it demanded?

Apple's lawyers will argue that Judge Cote's ruling "turns the antitrust laws upside down," as its brief asserts, because its entry into the market "kick-started competition," thereby "delivering higher output, lower price levels, and accelerated innovation." (Notwithstanding the price rise in key categories of books, prices fell overall, its expert testified.) Its case before the U.S. Court of Appeals for the Second Circuit will be argued by Theodore Boutrous Jr. of Gibson Dunn & Crutcher.

The government fires back that anything positive that came from Apple's entry into the market bore no connection to the price-fixing and is no excuse for it, as it argues in its brief, and that the court should defer to Judge Cote's "amply supported and well-reasoned decision." Deputy U.S. Solicitor General Malcolm Stewart will present its case.

Meanwhile, Amazon has given the appeal new timeliness by continuing to shock the squeamish with its big-footing of suppliers, flexing muscles only fortified by Cote's judgment against Apple. In May, as it negotiated a new contract with Hachette Book Group (a settling defendant in the ebooks price-fixing case), Amazon pulled the preorder buttons on most Hachette titles, stopped recommending its authors' works, and burdened Hachette's books with artificial delivery delays. Since Amazon still holds close to 65% of the ebook market and its share of the total book market has climbed to 40%, according to Codex Group, it wields enormous leverage. Though Hachette and Amazon settled their differences in November, an authors group, which met with antitrust regulators in October, has vowed to press on. Amazon declined to comment.

In truth, though, anyone complaining about Amazon has a tough row to hoe. Since the 1970s a broad consensus has emerged that the only proper purpose of the antitrust laws is to protect consumers, and low prices are presumed to be the consumer's highest priority. Under that regimen, gigantic discounters like Amazon seem to be golden.

This case may mark the high-water mark in that worldview, with regulators rushing to the rescue of a near monopolist against the alleged depredations of a new entrant.

CUE’S PERSPECTIVE
In November 2009, Apple was finalizing its top-secret iPad, which was to be unveiled in January. "I remember taking it home to play with," Cue recalls, "and it was clear to me it would make a great ebook reader." So he suggested to CEO Steve Jobs that Apple open an ebook store along the lines of iTunes. "He said, 'I'm not going to delay the product for this,' " Cue recounts, " 'but I'll let you go see what you can get done.' "

Cue knew little about the industry and had never met any of the publisher CEOs. His team set up six meetings for him in New York--one with each CEO of a Big Six -publisher--on Dec. 15 and 16. The publishers were Hachette, Harper-Collins, Macmillan, Penguin, Simon & Schuster, and Random House. Cue never met with more than one publisher at a time. (Penguin and Random House merged in July 2013.)

A few days before the first meeting, Cue recalls, he read a newspaper article about the "industry being in turmoil, Amazon selling books below cost, and the publishers saying that if the practice doesn't stop, they're going to stop selling new releases digitally. I thought, Oh, these are going to be more interesting meetings than I thought."

Judge Cote later found that when Cue showed up at those first meetings, he immediately plunged his company into a price-fixing cabal. "Apple's entry into the conspiracy had to start somewhere," she wrote, "and the evidence is that it started at those initial meetings in New York City."

To understand Cote's perspective, we need to flash back to two years before Cue conceived of entering the ebook market.

Key exhibitsTo prove price-fixing, the government displayed (below) the jumps in major publisher ebook -prices after the iBooks Store opened in April 2010. Apple stressed that overall prices for all publishers (the black line) declined. To prove collusion, the government showed (above) that the publisher CEOs phoned each other while negotiating their contracts with Apple. It couldn't prove, however, that Apple knew of these calls.

Graphic Source: Department of Justice

THE $9.99 PRICE POINT
Amazon introduced the first Kindle in 2007. It hit the sweet spot with consumers and launched an industry--and a lawfully earned monopoly.

The publishers sold their digital works to Amazon on the same wholesale model they used for "ink on paper." They were aghast, however, when Amazon started selling nearly every digital version of a new release or New York Times bestseller--which typically sold in hardback for $26 to $35--for just $9.99. The practice cannibalized hardback sales and devalued authors' intellectual property, the publishers protested. Over time, they feared, Amazon would use its market power to force down wholesale prices, slashing the funds available for author advances.

From Amazon's perspective, the price simply gained converts to a new way of reading, sold Kindles, and served the purpose of any loss leader: getting people to the store.

Though publishers raised wholesale prices, Amazon held fast. By 2009 it was absorbing $2, $5, and even $7 losses on the sale of nearly every copy of those key titles.

In their clubby world the publisher CEOs naively hobnobbed with abandon. Four times between September 2008 and September 2009, at least five of them supped together without lawyers present. Three of those dinners were in a private room at Picholine, a fine French restaurant on Manhattan's Upper West Side. Though the participants gave innocuous reasons for the gatherings, the government said they "offered publisher defendants opportunities to discuss how they could work collectively in pursuit of higher retail e-book prices."

There and elsewhere some publisher CEOs unquestionably shared sensitive business information, including plans about "windowing." Windowing was one of the few weapons the publishers had against Amazon. It meant withholding the release of an ebook until several months after the hardback release--the way paperbacks are withheld. None of the publishers wanted to do that because they'd lose the benefit of the buzz surrounding a new release, and the practice invited piracy. But in early 2009 two publishers warned Amazon that they might resort to windowing certain blockbuster titles.

For Amazon CEO Jeff Bezos, whose whole vision was to create "The Everything Store"--the title that author Brad Stone chose for his eye-opening book about the company---windowing was anathema. Bezos emailed a subordinate that windowing would be "an absolute declaration of war" that Amazon would not "tolerate," and warned a publisher of "the nuclear nature of windowing, even on a single title."

So the publishers faced a quandary. If a company started windowing, it risked retaliation from Amazon. But if publishers sought safety in numbers, coordinating their windowing, they would be colluding in violation of the Sherman Act.

In August, Hachette's then CEO, David Young, sent an email that evinced collusion. "Completely confidentially," he wrote the CEO of Hachette's French parent, "[Simon & Schuster CEO] Carolyn [Reidy] has told me that they are delaying the new Stephen King ... I think it would be prudent for you to double delete this from your email files when you return to your office."

The next month Simon & Schuster did window King's Under the Dome, and soon thereafter Hachette announced it would window a blockbuster of its own.

Three months later the pressure mounted. On Dec. 4, a Friday, Hachette told Amazon it would window many of its digital new releases for spring 2010. On Monday, Simon & Schuster followed suit. Later that week HarperCollins said that it would too. Newspapers heralded each dramatic step.

That a competitor follows another's lead is not collusion. If one airline raises its fare on a route, for instance, and every other carrier matches that fare within minutes, that's fine, as long as they didn't agree to do it beforehand.

In this case, though, given the Picholine dinners and the "double delete" email, Judge Cote inferred that the -publishers had "synchronized their windowing strategies." But she went further: She found that Cue--who at this point had still never spoken to a single publisher---somehow knew they were colluding. "Before Apple even met with the first publisher-defendant in mid-December," she wrote, "it knew that [they] were already acting collectively to place pressure on Amazon to abandon its pricing strategy." She cited only the fact that newspapers had reported each windowing announcement. (Cue says he never heard of the Picholine dinners until after the government sued in April 2012.)

THE AGENCY MODEL
Cue went to the first meetings with publishers mainly to listen and learn, he testified. He did convey, however, that the key terms of Apple's deals with each publisher were going to be the same--just as they were at iTunes and the App Store. "It's no different than it is with any other industry and Apple," Cue says in an interview. "Today every bank has the same basic deal on Apple Pay. No different than TV, movies, anything else." (Judge Cote acknowledged that negotiating from a standard contract was ordinarily lawful.)

Afterward, Cue returned to Cupertino to mull options. Though he'd originally planned to use a wholesale model, three publishers had urged him to consider agency. Otherwise they wouldn't relinquish their right to window.

Jobs was as adamantly opposed to windowing as Bezos was. Cue decided to switch to agency, which Apple was already using at the App Store. He'd propose the same 30% commission it took there, which generated a profit margin in the low single digits. (Cote acknowledged that the agency model was lawful.)

With a 30% gross margin, Cue testified, Apple didn't care how low the price was, because it could make money on anything--like the 99? songs it sold at iTunes. But he knew from his meetings with publishers that many wanted to price at levels both he and Jobs considered unrealistically high. So Cue decided to propose tiers of price caps, tied to the -suggested hardback list prices. (Judge Cote acknowledged that price tiers and caps were lawful.) After the holidays Cue emailed term sheets to each publisher, setting out those principles.

But there was one more term. It read: "All resellers of new titles need to be in agency model." The clause addressed the fact that if Apple was using agency (with publishers setting prices) while Amazon was using the wholesale model (with Amazon setting prices at $9.99), Apple's prices wouldn't be competitive. Most antitrust lawyers would say that this term was illegal, however, because Apple can't tell its suppliers how to deal with Apple's competitors.

As it happened, Cue quickly dropped that provision. He did so, he testified, not because of any antitrust issue, but because he realized it didn't adequately protect Apple. If a publisher made such a commitment but later couldn't persuade Amazon to switch to agency, what would Apple do? "We could terminate the agreement," Cue says, "but now we're still stuck with a bookstore that was uncompetitive and didn't work."

So when Cue sent out the actual draft contracts, he replaced that term with a "most favored nation" clause, or MFN. It gave Apple the right to match the price at which any new-release ebook was being sold by another retailer. (Cote acknowledged that MFNs are ordinarily legal.)

With the MFN, publishers could keep their wholesale model with Amazon, if they wanted. If they did, though, and Amazon priced a book at $9.99, Apple could sell that book at $9.99 too. In that case, of course, the publisher would make only 70% of $9.99 from Apple--about $7--instead of the $12 or $15 wholesale price it was used to getting for that book from Amazon. That would be the worst of both worlds for the publisher: It would still be stuck with the $9.99 price point, and it would be making less money too.

Faced with that prospect, it was foreseeable that publishers would probably either window all new-release ebooks to Amazon, or persuade Amazon to switch to agency.

Though the original, ill-conceived clause was replaced by the MFN, Judge Cote wouldn't let Apple off the hook. Rather, she found that it was "never rescinded," and lived on as an unwritten, wink-wink term in the conspiracy.

The government also argued--and Cote agreed--that under the unique circumstances of this case, the MFN was also illegal, because it "sharpened the publishers' incentives" to switch to agency.

"PRICES WILL BE THE SAME"
Negotiations continued down to the wire; the last publisher inked its deal only the day before Jobs unveiled the iPad at San Francisco's Yerba Buena Arts Center. (Random House didn't sign till a year later, so it wasn't named in the government's suit.)

At the launch Jobs showed how he could download a book from the iBooks Store. The volume chosen was priced at $14.99. Afterward, then Wall Street Journal columnist Walt Mossberg asked Jobs in a videotaped exchange: Why would someone buy for $14.99 a book that's available on Amazon for $9.99?

"That won't be the case," Jobs responded. "The prices will be the same."

To the government, that was a confession to price-fixing. But it was also just a description of how the MFN worked. If Amazon was still selling the book at $9.99, then the iBooks Store could sell it at that price too.

The day after the launch, Macmillan CEO John Sargent flew to Seattle to deliver Bezos a choice. Amazon could switch to agency, or it could stay on wholesale. But in the latter instance Macmillan would window all its digital new releases. "Amazon was clearly unhappy," Sargent stated in his written testimony, "and spent a few minutes letting us know that before the meeting came to a close."

The next day Amazon levied the maximum penalty: It removed the buy buttons on all Macmillan books, both digital and print. After a storm of bad publicity, Amazon agreed to switch to agency--though it kept Macmillan's buy buttons off until a contract was signed on Feb. 5. At Amazon's insistence, that contract included an MFN clause just like Apple's.

When the iBooks Store opened, most of the five publishers' new-release books were priced at or near the $12.99 or $14.99 price caps. That wasn't surprising, given that the publishers wanted to price their books at higher levels. But given the uniformity, Judge Cote found that Apple had helped the publishers fix prices, not cap them.

Clearly, one can view this affair through very different prisms. Judge Cote saw it through one. Apple hopes the appeals court will view it through another.

As for Cue, how does he look back at this nightmare?

"If I had it to do all over again, I'd do it again," he says. "I'd just take better notes."

This story is from the December 22, 2014 issue of Fortune.

]]>http://fortune.com/2014/12/02/apple-ebooks-litigation/feed/0aplrparloff2013APL22_2APL_E_BOOK_PRICES_WEBJeff Bezos, kindlesteve jobs, apple, ipad ibooksAmazon goes to war again (and again)http://fortune.com/2014/11/13/amazon-jeff-bezos-retail-disruptor/
http://fortune.com/2014/11/13/amazon-jeff-bezos-retail-disruptor/#commentsThu, 13 Nov 2014 12:30:54 +0000http://fortune.com/?p=860257]]>It was a mere two years ago that Fortune named Jeff Bezos, Amazon's chief executive, its Businessperson of the Year. Bezos and his company were on a roll: dominant in U.S. e-commerce, providers of impressive e-readers and tablet computers, and creators of a new billion-dollar web-services business that became a go-to resource for technology startups. Despite persistently thin margins and intermittent losses, Amazon and its stock price soared; Bezos was the envy of all.

Now, for the first time in years, Amazon's AMZN momentum is in doubt. Its enemies are emboldened, its products are uneven, and its competitors loom larger than ever. Even the company's once-bulletproof stock price has been crushed, off 25% from its peak. It's all enough to make a lover of schadenfreude wonder: Is the relentless flow of Amazon's success slowing to a trickle?

Last year, journalist Brad Stone's comprehensive book The Everything Store painted an unflattering portrait of an unpleasant company that treated employees and partners shabbily. As if on cue, Amazon this spring got into a spat with Hachette, one of the country's largest book publishers (including the imprint that published Stone's book), over e-book pricing. A routine commercial dispute turned into a public-relations black eye for Amazon, which delayed shipments and otherwise retaliated against Hachette. The battle continues.

Amazon kept racking up problems elsewhere. In June the company announced its long-awaited Fire phone only to watch the product become so unloved that it dropped the price from $200 to $1. (It recently recorded a $170 million loss on the phone and revealed it still had $83 million worth in unsold inventory.) In July it revealed slowing revenue growth rates for its Amazon Web Services unit at a time when a resurgent Microsoft MSFT has shown strength in its Azure business, an AWS rival that markets to the software giant's vast corporate customer base. In October, Amazon revealed it had lost $437 million in the third quarter, its biggest loss in years.

Amazon's sales continue to grow, but its investments in new products and services are growing faster. It spent more than $100 million on original Amazon Studios productions in a single quarter this year. It is preparing to build a logistics warehouse in the new free-trade zone in Shanghai--just two hours' drive from Hangzhou, where Alibaba is headquartered. Meanwhile, Amazon's competition is rejuvenated. Wal-Mart WMT is doubling down on e-commerce. Google is going toe-to-toe with Amazon on multiple fronts, including home delivery of products.

MIXED BAG The swings between Amazon’s profits and losses are a roller coaster for shareholders.Graphic Source: Amazon Earnings Reports

Investors aren't pleased. Amazon's stock hovers around $300, down $100 from its all-time high one year ago. It's the first time in six years that the stock has languished. If the situation persists, employees will suffer most. "Compensation is completely based on stock appreciation," notes John Rossman, a former Amazon executive and the author of the book The Amazon Way. "If Amazon gets perceived as a flat or negative stock, they'll have a difficult time retaining and recruiting engineering talent." Indeed, the weighted average value of the 17.5 million restricted stock units its employees hold is $276, per Amazon's securities filings. That means that on average, employees are sitting on next to no increase in the value of their incentive grants.

In 2012, Fortune called Bezos "the ultimate disrupter." If he doesn't become a decent moneymaker soon, Bezos himself could end up being the one who's disrupted.

AMAZON HAS DEMONSTRATED A TASTE FOR ENTERING NEW MARKETS WITH UNUSUAL FEROCITY. HERE ARE FIVE:

Amazon vs. Publishers
As it fights book publishers over e-book pricing, Amazon is taking on film studios and cable companies by spending hundreds of millions of dollars on Amazon Studios and Twitch, a video platform and community for gamers.WILDCARD: Netflix

Amazon vs. Microsoft
Amazon Web Services is the undisputed king of the cloud-computing world, multiples larger in size and revenue than the nearest competitor, Microsoft Azure. (Google and IBM are also in the mix.) But there is a price war afoot, placing pressure on all.WILDCARD: Rackspace

Amazon vs. Google
Amazon is thought to be developing its own software for placing advertisements online. The platform would make use of its knowledge of millions of Internet shoppers and go head-to-head with Google's primary source of revenue.WILDCARD: Facebook

Amazon vs. Alibaba
China's Alibaba, which this year made the world's biggest initial public offering, does not strongly compete with Amazon today. That is quickly changing as each company builds operations in the other's primary market.WILDCARD: JD.com

Amazon vs. Apple + Google
Fire phone, Fire tablet, Fire TV, and Fire TV Stick: Amazon has been trying to kindle conflict in a lucrative consumer-electronics ecosystem dominated by Apple, Google, and to a lesser extent Microsoft. Its success has been mixed, but that could change.WILDCARD: Samsung--Andrew Nusca

This story is from the December 1, 2014 issue of Fortune. Editor’s note: Amazon and Hachette resolved their dispute on Nov. 13, 2014.

]]>http://fortune.com/2014/11/13/amazon-jeff-bezos-retail-disruptor/feed/0TEC01_1Adam Lashinsky, Sr. Editor at LargeMIXED BAG The swings between Amazon's profits and losses are a roller coaster for shareholders.shotsfiredv2mediav2cloudv2advertisingv2ecommercev2electronicsv2One World Trade Center opens its doorshttp://fortune.com/2014/11/03/one-world-trade-center-opens-its-doors/
http://fortune.com/2014/11/03/one-world-trade-center-opens-its-doors/#commentsMon, 03 Nov 2014 12:41:09 +0000http://fortune.com/?p=847698]]>This post is in partnership with Time. The article below was originally published at Time.com.

By Rishi Iyengar, TIME

New York City's revival from its darkest hour 13 years ago will be completed on Monday, when One World Trade Center officially opens for business.

The western hemisphere's new tallest building, also known as Freedom Tower, will welcome Cond? Nast as its first tenant. The publishing giant is making the 20th to the 44th floors its new global headquarters.

The 1,776-ft. high tower was initially set to open in 2006 but became fraught with delays and political grappling. It provides a statement of hope and resurgence on the New York City skyline after the attacks of 9/11 that destroyed the iconic twin towers of the World Trade Center.

"I'm like everybody else, looking at this place in amazement," Kevin Murphy, who headed the team of ironworkers that helped piece the tower together, told TIME in March. "This is going to define New York."

]]>http://fortune.com/2014/11/03/one-world-trade-center-opens-its-doors/feed/0New York Area Prepares For Super Bowl XLVIIIlorenzettifortuneFacebook’s Sheryl Sandberg stars in a new comic bookhttp://fortune.com/2014/09/23/facebooks-sheryl-sandberg-stars-in-a-new-comic-book/
http://fortune.com/2014/09/23/facebooks-sheryl-sandberg-stars-in-a-new-comic-book/#commentsTue, 23 Sep 2014 17:49:10 +0000http://fortune.com/?p=796813]]>Facebook’s COO Sheryl Sandberg, the author of 2013’s “Lean In,” is starring in a new comic book.

The 32-page tome is slated to be released Wednesday and is being published by Bluewater Productions, the business behind such comic books about pop culture icons including Kim Kardashian, Stephen Hawking and Anderson Cooper.

The comic book, which will be available both in print and digitally, is a biography of Sandberg’s life told in the first person. It begins with her freshman year at Harvard University in 1987. Written by Michael Frizell and illustrated by Angel Bernuy, the comic is part of a series called Female Force, which has featured a slew of powerful women including Hillary Clinton, Michelle Obama and Melinda Gates.

“Our goal is to show the behind-the-scenes machinations -- many of them ignored by the mainstream media -- that resulted in Sheryl Sandberg becoming a leading voice in empowering successful businesswomen,” said publisher Darren Davis in a statement.

In an email to Fortune, Davis said: “We have not heard back from her people.” He added that the books are “heavily researched.” The publisher also reaches out to “all subjects to see if they want to be a part of it and donate a percentage to a nonprofit of their choice.”

Zero to One: Notes on Startups, or How to Build the Future

by Peter Thiel with Blake Masters

Peter Thiel—the co-founder of PayPal, first investor in Facebook, and famed contrarian—shares lessons from his 18 years as a venture capitalist, hedge fund manager, and builder of billion-dollar companies. You won’t agree with everything, but you’ll see the business world through new eyes. (see excerpt here)

The Innovators: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution

by Walter Isaacson

The mega-bestselling biographer of Steve Jobs takes a long view of the Internet revolution. Starting with the first computer program (written by a woman in the 1840s), the book profiles the people and the teams that brought us into the modern technological era (see excerpt here).

Open Secret: The Global Banking Conspiracy That Swindled Investors Out of Billions

by Erin Arvedlund

Remember the Libor scandal? (Who could forget?) From one of the first journalists to voice skepticism about Bernie Madoff comes a new look at the crisis’s other mind-boggling injustice: the largest price-fixing scandal in modern history—and the relatively small group of people who created it.

The Shifts and the Shocks: What We've Learned--and Have Still to Learn--From the Financial Crisis

by Martin Wolf

Elite incompetence? Check. Macroeconomic trends destabilizing the global financial system? Check. Ticking time bombs? Also check. The influential Financial Times columnist’s new book (out on the sixth anniversary of the crisis) has it all, plus a look at why recovery could still be a long way off.

Crazy Is a Compliment: The Power of Zigging When Everyone Else Zags

by Linda Rottenberg

CEO of a nonprofit that supports entrepreneurs primarily in emerging markets, Rottenberg pens an ode to the mad ones. Her organization, Endeavor, has coached 948 would-be business leaders (and says it has helped create 400,000 jobs). These are Rottenberg’s takeaways from 17 years of mentoring.

Being Mortal: Medicine and What Matters in the End

by Atul Gawande

The more we know about end-of-life care, the clearer it is that more medicine isn’t always better medicine. The New Yorker staff writer, practicing surgeon, and professor at Harvard Medical School tackles one of his profession’s (and perhaps humanity’s) most difficult questions.

Winners Dream: A Journey From Corner Store to Corner Office

by Bill McDermott with Joanne Gordon

This is not your typical exec: The CEO of the $22 billion German software giant SAP paid for college by buying (at age 16) and running a Long Island deli where he had worked part-time. His book of leadership stories and lessons has drawn fans from Jack Welch to Bono.

World Order

by Henry Kissinger

To invade or not to invade? The consummate realist statesman offers a look at the search for world order at a time when it seems as though there’s little order left. At the venerable age of 91, the former secretary of state presents both an examination of the past (including details from his own talks) as well as prognoses for the future.

All the Truth Is Out: The Week Politics Went Tabloid

by Matt Bai

The photo was too good not to run: the front-runner for the Democratic nomination for President in 1987 with a 29-year-old model in his lap. Bai, the former chief political correspondent for The New York Times Magazine and current Yahoo News columnist, argues that the ensuing media frenzy set the standard for the ones to come.

Me, Inc.: Build an Army of One, Unleash Your Inner Rock God, Win in Life and Business

by Gene Simmons

The only time it’s acceptable to take advice from someone in Kabuki makeup and a metal-plated codpiece is when he’s sold more than 20 million albums and has 10 platinum records. And let’s not get started on the thousands of Kiss licensing deals Simmons helped bring to the band.

This story is from the October 6, 2014 issue of Fortune.

]]>http://fortune.com/2014/09/18/what-to-read-now/feed/0BRI.10.06.14_booksvandermyThriving in an Amazon worldhttp://fortune.com/2014/09/18/thriving-in-an-amazon-world/
http://fortune.com/2014/09/18/thriving-in-an-amazon-world/#commentsThu, 18 Sep 2014 11:20:48 +0000http://fortune.com/?p=785466]]>Don't tell Sharon Anderson Wright that bookstores are a dying industry. The 56-year-old CEO of Half Price Books took a disorganized collection of stores co-founded by her mom--they started by selling used paperbacks and hardcovers out of a dingy former laundromat--and transformed the operation into a chain that is defying a seemingly inexorable tide. While bookstores are shuttered around the country and industry revenue has decreased an average of 3.2% a year over the past five years, Half Price Books is growing. It opens about five stores a year, with revenues rising from $50 million in 1995 to $240 million in 2013. The company is able to resist the Amazon.com tsunami by diversifying its offerings and preserving an in-store experience, while keeping its real estate costs low and remaining debt-free as it expands beyond its 120 retail locations in 16 states. And today the stores still honor their founding promise: They'll buy virtually anything that is printed (or recorded), excepting newspapers. That's a proposition that keeps customers returning--in any era.

I was born in Tulsa, the youngest of three girls. When I was 5, we moved to Texas, and my dad became a cuckoo-clock salesman. In 1968 my mom [Pat Anderson] decided to get her psychology degree. Ken Gjemere [pronounced jim-ree] was a buyer for Zales, which my dad sold to, and our families hung out together.

Ken was a World War II vet who was awarded the Silver Star for valor. He became an environmentalist and a staunch peace activist during the Vietnam War years. I always called him our fearless leader. My mom was a protesting hippie type, and they both loved books and recycling. After Ken and Pat separated from their spouses, they moved toward being a couple, and in 1972 they decided to go into business together and start a bookstore. They never married, but every Tuesday they decided to stay together for another week.

They found a 2,000-square-foot location on Lovers Lane in Dallas. It was a ratty old laundromat. The monthly rent was $174. We cleaned it up, built our own shelves, and painted it. We'd load the trucks, unstop the toilet, everything.

As a teenager, I read Kurt Vonnegut, Robert Heinlein--anything science fiction and strange. I was 13, and my job was to sort out the books and shelve them. I became kind of an anthropologist, watching what people read, what they sold and bought.

There weren't many bookstores at all back then. Ours was an original concept. Pat and Ken wanted to make sure there were affordable reading options for everyone in a comfortable, inviting place to shop. By buying all the items people brought in, they weren't censoring anyone. We'd pay cash for anything printed or recorded except yesterday's newspaper, which meant we had current offerings to sell. It was different from other used bookstores, where you traded for books, or high-end antiquarian stores, which intimidated people. We did so well, we opened our second location eight months later in a former meat-storage place.

"My mom had kept all the books by hand. She had written stuff on envelopes…It was a huge challenge to figure out the bookkeeping."--Sharon Anderson Wright

It was always a challenge to have cash on hand to pay people. You couldn't say, "We don't have the money to pay you." I don't know how Pat and Ken managed. But we never were fancy people, so I don't think we would have noticed any hardships. We ate ravioli out of a can and hamburger casseroles.

In 1976, after I graduated from high school, I became the manager of our store in Richardson, Texas. My dog Dylan and I were the only ones there most of the time. I'd hide the money in a coffee can behind a section somewhere when I needed to go out to get something to eat. In our music section, we bought 45s, eight-track-tape cassettes, Beatles records. Now we have iPads as well as high-end vinyl. It's come full circle.

Ellen, my oldest sister, is chairperson of the board now. Both of her children are in the business too.

Wright with her mother, Pat Anderson (left), outside their St. Paul store in the late 1980sPhoto: Courteys of Half Price Books

From 1979 to 1981, I worked four days a week as a bookseller in the flagship store and took classes at Richland Junior College. I never got a better offer, and eventually it was obvious I was the one who would stick around. I became Dallas district manager, then general manager in 1990, and started shadowing my mom.

We spent almost every day together. She was a smoker and had chronic obstructive pulmonary disease. She lost patience in her last couple of years. We knew she wasn't long for this world. The day she died, Ken was partially retired, and I became president and CEO. I was scared to death. It was 1995, and I was 37. My mom was 40 when she opened the first store in 1972.

My mom had kept all the books by hand. She had written stuff on envelopes and little notes. It was a huge challenge to figure out the bookkeeping. In 1995 we had 55 stores, with $50 million in sales. I had had no formal education, and everyone was very patient, teaching me. I had incredibly supportive people who had been there a long time. The head of operations [and] the CFO were all around from the time I was a kid and wanted me to succeed.

"There are still a lot of people who like to browse bookstores and be surprised by what they find. People like to handle paper. It’s the permanency of it."

I've always operated with consensus. People did what they needed to do, and I learned what I needed to learn. We only did what we could afford to pay for, so we always operated on a cash basis. I had my first kid at 40, then the second one at 43. They're my priority, so I'm often answering emails at 1 to 2 a.m.

Today we have our own publishing arm, and we produce our own stationery, calendars, and CD wallets to sell. Our wholesale division sells to museums, independent bookstores, and Barnes & Noble. We have five to six buyers traveling the country, buying remainders that we can sell at half price. If we buy too much, we sell the extras to Barnes & Noble or others. All of us in the book world feed off each other. There's competition, but it's all with great people.

The book industry has changed dramatically because of Amazon, e-readers, and tablets. Stores can't ignore the fact that you can get just about any book you want while you're in your pajamas, and it has had an effect on everyone. But there are still a lot of people who like to browse bookstores and be surprised by what they find. People like to handle paper. It's the permanency of it. We did a survey, and our customers buy 37 books a year. With the recession, we closed three stores, but we're still profitable.

THIS STORY IS A DOWNER Sales at bookstores (as opposed to at e-tailers such as Amazon.com) have steadily dropped over the past decade.Graphic Source: IbisWorld

The challenges come with huge increases in insurance costs and real estate. We raised our minimum wage to $10 across the board and want to offer good benefits as we grow new locations. So we only take on 8,000 to 10,000 square feet for the majority of our locations. That gives us a much smaller footprint than the big chains, making our real estate costs much lower. Because we are private and don't have to answer to shareholders, we can expand at our own pace. Plus, our inventory is different than most traditional book retailers' and is lower in cost, so that gives us a different customer base. We're trying to be a bookstore, record store, antiquarian store, and comic-book store.

We've had people offer us venture capital and ask to franchise or partner with us, but I've never seen any gain for us. Borders was in too high-priced real estate and was stuck with new books you get little money for. Barnes & Noble is facing that too, and spent a lot of money on the Nook. We're the tortoise that's slow and steady. We just opened in St. Louis, and are looking at Atlanta, Denver, and Nashville. If we can afford it, we'll do it.

I used to feel insecure about my visions, but now I feel comfortable about them. Fourteen years ago, people thought I was crazy when I wanted to buy 12 acres of land in the heart of Dallas for our flagship store and corporate offices. It was big and expensive, but I was adamant about having the offices connect to the store so that the people running the company would see what others are doing. Our employees are hauling, bending, and lifting, and it's important for corporate people to see that every day. You get to talk to customers and learn about them too.

We also house our distribution center and the "Woodshoppe," where we build our own bookshelves and fixtures here. Having the Woodshoppe gives us more flexibility and saves us money, since our locations are all second-generation real estate. We never know what kind of a layout each store will have.

The main location is the only retail location where we own the building and land itself. So this is the only place where we truly have control over our neighbors. We wanted to make the neighborhood better, so we purchased the land across the street. We have Half Price Books and Whole Foods here, and I wanted REI, a like-minded company, to be across the street. So I went to REI in Seattle and convinced them to come. Now I'm trying to handpick other stores that will appeal to our customers, rather than take the first tenant who comes along.

I could have been filthy rich many times over if I'd sold the company. But I didn't because I would have left the people who did all the work to suffer. Here I do whatever I want, and I'm pigheaded about it. I trust people who tell me when I'm wrong. It's wonderful to be able to provide 3,000 people with a nice place to work and to be able to donate millions of books to people who can't afford them. It all makes me pretty happy.

Traditional booksellers have been hurting since the emergence and rise of digital books in the last five years. The explosion of e-books, which now account for some 27% of book unit sales by some estimates, has certainly claimed its victims, most notably Borders, which folded three years ago, and led many to doubt Barnes & Noble BKS could escape a similar fate. Adding to the doom and gloom, some popular bookstores across the country have shut their doors this year in key markets like New York.

But e-books’ share of the overall book pie appears to be peaking, and customers are rediscovering the joys of reading an actual book, easing pressure on Barnes & Noble, the largest remaining U.S. bookstore chain.

The largest U.S. bookstore chain reported on Tuesday that comparable sales, stripping out the effect of the Nook sales, a business Barnes & Noble has scaled back and is planning to separate, fell a mere 0.4% last quarter, the third quarter in a row showing that its bread-and-butter business — selling physical books — has stabilized. Its smaller, regional rival, Books-A-Million BAMM has similarly reported a moderation in the decline of book sales.

“People still love going into a bookstore and are always looking for something new,” Mitch Clipper, CEO of Barnes & Noble Retail Group, the unit that oversees its 658 bookstores. Some of Barnes & Noble’s good fortune of late stemmed from the standoff this summer between Amazon.com AMZN and book publisher Hachette that made many books under that imprint unavailable on Amazon.

And while e-books remain popular, their breathtaking growth has stalled. Indeed, according to a report by BookStats released in June, revenue in 2013 of e-books for mainstream books was unchanged compared to 2012, with lower prices offsetting higher unit sales. The hemorrhage of printed books sales is over, giving the like of Barnes & Noble a reprieve.

Barnes & Noble also got a boost from toys and games, whose sales rose 19.5% last quarter, which ended August 2. The retail division’s revenues fell 7% because of the drop in Nook readers sold in store, but the physical stores continued to be a cash cow, and proved to be more profitable despite the revenue decline. And with company continuing to close 15-20 stores a year, it looks like a return to positive comparable sales changes is within reach.

Still, the report wasn’t all good news. Barnes & Noble said that it had postponed the relaunch of its e-commerce until 2015 because it was taking longer than expected, a setback that likely will cost it sales of physical books. But that problem aside, it’s hard to deny there’s life yet in brick-and-mortar book selling.

]]>http://fortune.com/2014/09/09/barnes-and-noble-results/feed/0General Views Of Barnes & Noble Ahead Of Earnings DatapwahbaFlipboard CEO: We’ll never make original contenthttp://fortune.com/2014/08/14/flipboard-ceo-well-never-make-original-content/
http://fortune.com/2014/08/14/flipboard-ceo-well-never-make-original-content/#commentsThu, 14 Aug 2014 14:34:35 +0000http://fortune.com/?p=770401]]>The way Mike McCue tells it, Flipboard isn’t in the business of competing with the very same publishers whose content flow through his popular news-reading app. Which is why Flipboard’s 100 million readers will never find it generating original content the way media companies like Netflix NFLX, Amazon AMZN, or LinkedIn LNKD do.

“We don't want to compete,” McCue told the technology editor Owen Thomas during an industry event in San Francisco on Wednesday. “That’s not a line we want to cross.”

McCue originally founded the Palo Alto, Calif.-based Flipboard in 2010 as an app for tablet users that pulls content from publishers including The New York Times, Vanity Fair, and yes, Fortune, among others, and presents it in a magazine-like layout. (“Your personal magazine,” as Flipboard continues to describe itself.) The company, which has raised nearly $160 million from backers including Jack Dorsey, Ron Conway, and Kleiner Perkins Caufield & Byers, says it has more than 100 million users.

Startup founders are often pressured to explore multiple ways to make money, but McCue remains firm in the idea that Flipboard’s revenue generator can and should be advertising. Already, the company displays full-page ads from brands such as Gucci, Hugo Boss, Toyota, and Starbucks. In April, Flipboard launched its Small Publishers Program, an advertising experiment aimed at, well, small publishers. The company peppers ads throughout the content imported from publishers; the publishers are paid a small amount for every story a user reads, and see Flipboard as a source of (modest) incremental revenue. Flipboard has paid publishers $1 million to date and expects this year to accelerate the rate in which it generates revenue. The startup plans to begin supporting video ad formats in September.

The media industry is a $600 billion business, McCue said. Many publishers have digital operations or are in the process of transitioning to them, but just 20% of all ads are currently digital, he says. This in theory leaves a huge, untapped market opportunity for a company like Flipboard to facilitate the switch. “We're literally in early innings,” McCue said. “If you have a long view and have good principles about what you're doing for your audience, you'll create something great.”

]]>http://fortune.com/2014/08/14/flipboard-ceo-well-never-make-original-content/feed/0Owen Thomas (left), editor-in-chief of ReadWrite, with Mike McCue, chief executive officer of Flipboard.JP MangalindanOnswipe sold to Beanstock Media, no return for investorshttp://fortune.com/2014/08/04/onswipe-on-verge-of-being-acquired/
http://fortune.com/2014/08/04/onswipe-on-verge-of-being-acquired/#commentsMon, 04 Aug 2014 20:39:40 +0000http://fortune.com/?p=751707]]>Onswipe, a New York-based ad-tech startup, has sold itself to Beanstock Media, a Silicon Valley-based adtech company, Fortune has learned. An announcement could come as soon as tomorrow.

A private message from Onswipe CEO Jonty Kelt, obtained by Fortune, called the deal a “soft landing,” which is startup parlance for failure. Onswipe had been facing a cash crunch. Last fall, the company brought in Kelt, the"adult" CEO, and bumped co-founder Jason Baptiste to chief marketing officer.

Kelt’s message stated that there is no return for investors, as proceeds from the deal are only enough to cover $3.4 million in venture debt, along with a $2 million convertible bridge note provided by Spark and QED Capital. The latter was provided six months ago “to keep the company alive in order to find a soft landing,” Kelt wrote. Beanstock will absorb 24 of Onswipe’s 28 employees.

Onswipe, which offers a tablet publishing tool with built-in ads reminiscent of magazine ads, garnered a lot of press when it launched out of the first class of Techstars NY in 2011. Baptiste has been described as a “cocksure, but charming scene-stealer,” and was featured heavily in a Bloomberg TV reality show about the accelerator class.

After Techstars, Onswipe raised $6 million in venture funding from Spark Capital, Lerer Ventures, Lightbank, SV Angel, Morado Venture Partners, Eniac Ventures, Thrive Capital, Apricot Capital, betaworks, Yuri Milner and other angel investors. In late 2012, the company raised an undisclosed $5.3 million Series B round of funding led by QED Investors and Spark Capital. Then last year, QED and Spark Capital provided the $2 million bridge note.

Onswipe was hailed as one of the success stories to come out of Techstars' New York program. Indeed, the company drew 5,000 publishers to its platform and, last November, reported an an audience of 25 million monthly unique visitors on iOS. One source familiar with the company said Onswipe generates roughly $500,000 in monthly revenue, from which the company takes a cut of 50% or less. One year ago, the company decided to rebuild its technology from scratch, but that effort took too long to build and “caused a domino effect,” Kelt wrote. “Revenues were lower than expected and burn higher than expected,” he said. The company tried to raise new capital but came up short, raising the bridge note instead.

Beanstock Media bills itself as a publisher trading desk company. It has operated at break-even or a profit in recent years, bringing in $40 million in revenue in 2013, according to Kelt’s message. The company acquired Onswipe because it does not have a mobile strategy, and it wanted more direct sales and a New York presence.

In the message, Kelt noted that Onswipe “regrets that this is the outcome” for investors. “We really tried to find a better outcome,” he wrote. OnSwipe declined to comment on any potential sale.

Editor’s note: On Tuesday, August 12, Onswipe confirmed the deal. Spark Capital partner Alex Finkelstein said Kelt’s note, which stated investors would get no return, was taken out of context, because his firm, along with other investors he declined to name and Onswipe employees, received Beanstock equity in the deal.

This post has been updated from its original version, published Monday, August 5, which reported that Onswipe was for sale but did not name the buyer.

]]>http://fortune.com/2014/08/04/onswipe-on-verge-of-being-acquired/feed/0Onswipe touts its platform as an easy way for publishers to bring their content to the mobile web.griffitherinSponsored content is the holy grail of digital publishing. But does it work?http://fortune.com/2014/07/09/readers-dislike-sponsored-content-native-ads/
http://fortune.com/2014/07/09/readers-dislike-sponsored-content-native-ads/#commentsWed, 09 Jul 2014 11:00:08 +0000http://fortune.com/?p=741345]]>In recent years, a debate has raged on among publishing and advertising industry insiders over “sponsored content”--more recently called “native advertising” and once known as “advertorial”--the sort of advertising that looks very much like editorial content but is, in fact, directly paid for by an advertiser.

The approach has been embraced by newer digital ventures such as BuzzFeed and new digital efforts for very old publications like Forbes and The Atlantic. Industry peers watched and discussed: Is it deceptive? Is it ethical? Does it even work?

Whatever the answers, there’s no denying that the approach is suddenly in vogue. Storied news organizations such as the Washington Post, Wall Street Journal and New York TimesNYT have since taken the native plunge. (Fortune has also decided to engage in the practice.) Last year, advertisers spent $2.4 billion on native ads, a 77% jump over 2012. That same year, the Post's CRO called native ads "a spiritual journey." (Really.)

Native ads may be popular with publishers, but consumers are not in love, according to a new survey conducted by Contently, a startup that connects brands with writers who then create sponsored content. (Yes, the survey runs counter to Contently's mission; more on that in a moment.)

Two-thirds of the survey's respondents said they felt deceived when they realized an article or video was sponsored by a brand. Just over half said they didn't trust branded content, regardless of what it was about. Fifty-nine percent said they believe that a news site that runs sponsored content loses credibility--although they also said they view branded content as slightly more trustworthy than Fox News.

Publishers and advertisers tend to respond to concerns of confusion or credibility with the same response: "It's clearly labeled!" Simple disclosure solves all conflicts, they suggest. Readers are smart enough to figure it out, and critics don’t give them enough credit.

To wit: "They get the drill," said Lewis Dvorkin, the True/Slant founder who led the massive expansion of the Forbes contributor network and its sponsored BrandVoice program, at an event last year. Likewise, Times publisher Arthur Sulzberger Jr. has said the native ads on the newspaper’s website are clearly labeled to ensure there are no doubts about “what is Times journalism and what is advertising.”

But Contently's findings, based on a survey of 542 people, throw cold water on the notion that readers "get the drill." According to the study, readers are confused about what “sponsored” even means: When they see the label "Sponsored Content," half of them think it means that a sponsor paid for and influenced the article. One-fifth of them think the content is produced by an editorial team but "a sponsor's money allowed it to happen." Eighteen percent think the sponsor merely paid for its name to be next to the article. Thirteen percent think it means the sponsor actually wrote the article. Even the U.S. Federal Trade Commission is perplexed; a panel on native advertising last year “raised more questions than it answered.”

It gets worse. When readers do know what "sponsored" means, they still feel deceived. Fifty-seven percent of the study’s participants said they would prefer that their favorite news sites run banner ads over sponsored posts. (The irony: Native ads were supposed to be the highly engaging innovation to kill the lowly banner ad.) Only 18.7% of respondents said they prefer sponsored posts because they're more interesting. Two-thirds of respondents said they are less likely to click on an article sponsored by a brand. From the perspective of a reader, sponsored content doesn't look like a spiritual journey at all.

In fairness, people rarely cop to the fact that they enjoy advertising or that it works on them. This is why, every few years, a survey is released claiming that social media ads, particularly those on Facebook FB, don't work. That may be the case, but I doubt brands would continue to pour billions of dollars into social media advertising--$8.3 billion this year--if it were.

But there is no denying that readers’ response to sponsored content is negative and especially strong. The findings of Contently's survey follow data released earlier this year by Chartbeat, a web analytics company, showing that only 24% of readers scroll through sponsored content, versus 71% for editorial content.

You may wonder what all this means for a company like Contently, which is built on the premise that branded content will become a huge part of the marketing industry. Concluding its study, the company suggests with a dose of optimism that brands and publishers will eventually figure things out before they turn readers off completely.

There is hope for the native ad yet. But publishers should be careful: though readers may be increasingly looking at sponsored content, it doesn’t mean they like what they see.

]]>http://fortune.com/2014/07/09/readers-dislike-sponsored-content-native-ads/feed/0Shocked businessman looking at computer monitor.griffitherinAmazon and Hachette battle on over book deal and shipping delayshttp://fortune.com/2014/05/29/amazon-and-hachette-battle-on-over-book-deal-and-shipping-delays/
http://fortune.com/2014/05/29/amazon-and-hachette-battle-on-over-book-deal-and-shipping-delays/#commentsThu, 29 May 2014 19:31:36 +0000http://beta.fortune.com/?p=500373]]>The feud between Amazon and Hatchette publishing has extended into another week with Hachette throwing the latest barbs at the online retail giant for delaying shipments of its books.

On Wednesday, the publisher accused Amazon of selling books “like any other consumer good.” “They are not,” Hachette said in statement filled with indignation at Amazon’s business practices.

Over the past few weeks, Amazon has delayed shipments of Hachette books, and last week blocked its customers from pre-ordering new Hachette titles. Amazon AMZN wants a bigger cut on sales from Hachette, but the publisher has resisted, according to a New York Times report.

Amazon’s boycott of Hachette has made it a target of contempt in the publishing world. Authors that write under contract for Hachette complain about a drop in book sales and fear lower royalties.

In reaction, Amazon has tried to deflect the bad publicity. The company posted a message in its website forums saying that it takes it seriously whenever “a business interruption affects authors.” As a peace offer, Amazon proposed a joint fund with Hachette to pay authors back for any missed royalties.

Hachette, however, hit back by laying the blame for the dispute and financial consequences entirely on Amazon.

“We will be happy to discuss with Amazon its ideas about compensating authors for the damage its demand for improved terms may have done them, and to pass along any payments it considers appropriate,” Hachette said.

Amazon has acknowledged that the fight is far from over. Although the companies have been working hard to reach an agreement, the two sides are still far apart, the company said on Tuesday.

"Though we remain hopeful and are working hard to come to a resolution as soon as possible, we are not optimistic that this will be resolved soon,” Amazon said.

]]>http://fortune.com/2014/05/29/amazon-and-hachette-battle-on-over-book-deal-and-shipping-delays/feed/0121119095100-t-amazon-bezos-sales-tax-00003129-monstersnyderfortuneIn the standoff between Amazon and Hachette, the customer comes lasthttp://fortune.com/2014/05/27/in-the-standoff-between-amazon-and-hachette-the-customer-comes-last/
http://fortune.com/2014/05/27/in-the-standoff-between-amazon-and-hachette-the-customer-comes-last/#commentsTue, 27 May 2014 14:13:54 +0000http://beta.fortune.com/?p=496901]]>FORTUNE -- Having written extensively about great companies like Apple AAPL, Google GOOG, and Amazon AMZN, I'm often asked what ordinary people, managers, and companies can learn from their examples. Apple's focus is legendary. Google's collection of talent has been a key to its success. Amazon has a handy-dandy resource for explaining to others its business approach: a list of Leadership Principles posted on its site.

The leadership principles, a kind of corporate values statement, is a good read and contains some gems that would greatly benefit businesses everywhere. Some of my favorites include "bias for action" and "have backbone; disagree and commit." But Amazon made a conscious decision to lead its 14-item list with "customer obsession." It's worth quoting in full:

"Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers."

Corporate value statements can be poppycock or incredibly meaningful. At Amazon, the notion of thinking first about the customer might well be poppycock, but if so it is frequently repeated poppycock. When I interviewed Jeff Bezos for a cover story in late 2012, in which Fortune named him CEO of the year, he quoted the “starting with the customer” line to me verbatim. He took things a step further, suggesting that Amazon people even think about customers in the shower. The point was that while some companies wake up thinking about the competition, Amazon takes its first daily corporate breath considering the people who keep them in business.

I've been thinking about Amazon's language the past few days, as its dispute with Hachette Book Group has flared into the open. According to press coverage, Hachette and Amazon are locked in a fight over e-book pricing. Amazon has reacted by making it more difficult for customers to buy books published by Hachette. Its two primary weapons have included making new Hachette titles unavailable for pre-order, a crucial sales opportunity, and slowing delivery of so-called backlist books, titles that are in print but have been on the market longer.

I should pause to note that I'm hardly a dispassionate observer. The paperback edition of my January 2012 book Inside Apple is currently in print. Its publisher is the Hachette imprint Grand Central Publishing. Amazon says, without further explanation, the book "usually ships within 2 to 5 weeks."

That's nonsense, of course. Barnes & Noble's website says my book should ship within 24 hours. While Amazon is selling my book at full price, designed to punish Hachette by discouraging purchases, B&N offers a customer-friendly 35% discount. (I encourage you to buy it there.) It's not just big retailers that can sell my book quickly. Over the holiday weekend I walked over to my wonderful neighborhood book shop, Christopher's Books in San Francisco, and inquired how long it would take to get my hands on a copy of Inside Apple. The book- and customer-loving woman behind the counter apologetically told me it would take until Wednesday — but only because of the Memorial Day holiday. (Christopher's will order and ship books for anyone, anywhere. Call them.)

I've used my book to illustrate the case, but I have in no way been singled out for rough treatment. I checked multiple books that my editor at Hachette has issued in the last couple years. All are being subjected to the same dastardly treatment by Amazon. (The New York Times, the Wall Street Journal, and the Washington Post all have good details on the various authors affected by the spat. The Post, of course, is owned by Amazon's Bezos.)

But let's get back to the customer. Assume for a moment that Hachette is the bad guy here, that the smallest of the major book publishers is making unreasonable demands on Amazon. (This seems unlikely, but bear with me.) Even if Hachette were behaving badly, I'm scratching my head trying to figure out in what strange universe Amazon believes that making it difficult for its customers to buy Hachette's products is consistent with "customer obsession." I'm trying to understand how Amazon thinks this will help it "earn and keep customer trust."

Neither side is saying very much, by the way. Amazon isn't commenting, and Hachette is issuing platitudes. I asked both companies over the weekend how many titles are affected by the dispute, and neither would say.

At the beginning of this year I reviewed Brad Stone's excellent book about Amazon, The Everything Store. Because Stone's publisher is part of Hachette, he too is caught in the crossfire. In my review, I said the book "will make anyone who reads it, regardless of how much they love being an Amazon customer, feel icky about themselves for just how much they enjoy buying things at Amazon." I for one feel ickier than ever. I buy something from Amazon several times a week. I choose the Kindle format for my e-books over Apple's iBook format because the Kindle app works so damn well on Apple and Amazon devices alike.

As Farhad Manjoo noted recently in the Times, for years Amazon's detractors have been warning about the dangers of market concentration. Now we're seeing a vivid example of those dangers realized. I can't imagine in the future recommending that anyone buy my book — or my future books — on Amazon if they have an alternative. Yet as for myself I suppose I'll keep right on buying books and dental floss and gadgets from Amazon. And feeling icky about myself for it.

]]>http://fortune.com/2014/05/27/in-the-standoff-between-amazon-and-hachette-the-customer-comes-last/feed/0DO NOT USE!clyons2014Simon & Schuster goes digital as two startups score a ‘Big Five’ publisherhttp://fortune.com/2014/05/21/simon-schuster-goes-digital-as-two-startups-score-a-big-five-publisher/
http://fortune.com/2014/05/21/simon-schuster-goes-digital-as-two-startups-score-a-big-five-publisher/#commentsWed, 21 May 2014 14:23:14 +0000http://beta.fortune.com/?p=386886]]>FORTUNE — When two startups, called Oyster and Scribd, launched platforms last Fall, they were each hailed as “Netflix for books.” Like Netflix NFLX or Spotify, their platforms offer users unlimited consumption of digital media, in this case, books, for a monthly fee.

The services were each well-received by media and subscribers. Oyster would not reveal its subscriber numbers, but Scribd boasts 5 million mobile app installs and claims 80 million monthly users (which is not the same as paying subscribers).

That comes as no surprise: Netflix and Spotify, which have a respective 35 million and ten million subscribers, have primed consumers for paying a monthly fee to rent digital content. It’s the “access over ownership” trend, where consumers prefer to pay to stream content via the web, rather than buy the content outright. The only problem with applying the access model to books, like Oyster and Scribd, is that publishers have been slow to go digital. They’ve been forced by Amazon to lower prices and to sell e-books, but they weren’t eager to jump on board with digital access-based platforms like Oyster or Scribd.

Oyster had to work for a year to get one of the “Big Five” publishers on board for its launch. To do so, the company had to show publishers that it wouldn’t cannibalize their existing sales. When Oyster opened its doors, it had 100,000 titles available. But it couldn’t have launched without the support of top publisher HarperCollins, says CEO Eric Stromberg. Now Oyster has 500,000 titles. Likewise, Scribd has a inked deal with HarperCollins and offers 400,000 books.

The publishing world’s early adopters saw that platforms like Oyster and Scribd could bring a new audience to their books. Beyond that, Stromberg says Oyster’s early growth and engagement showed publishers that a partnership could sell or get reach for lesser known books in the publisher’s repertoire. The distribution of books read across each publisher extends to 95% of their catalogs, including backlisted titles, Stromberg says.

Today, Oyster and Scribd add Simon & Schuster, one of the country’s top five publishers, to their platforms. The deal adds an unspecified number of Simon & Schuster backlist books to each of their libraries. Stromberg called the deal a “game-changer,” saying it “represents a tipping point” for major publishers in their adoption of digital. Trip Adler, CEO of Scribd, noted that subscription books was a completely new concept two years ago, but at this point, the publishers “are very eager to join … as more and more readers adopt the subscription model and it becomes a more common and mainstream way to read.”

The startups did not work together on securing the deal, but Simon & Schuster’s decision to join both at once highlights how competitive the market is. A Simon & Schuster representative said the company took its time before going digital because it needed to be comfortable that its authors would be compensated properly, and that the company “would be able to preserve the highest level of sales of our new books.”

Still, it’s worth noting that the two startups have very different backstories: Scribd began in 2007 as a place to publish academic papers, evolving into a media reader tool for media companies. The company raised $25.8 million over the years (the latest of which was raised in 2011). In October 2013, Scribd launched its digital book subscription service.

Meanwhile, Oyster was formed in 2012 as a subscription book service. The company has raised $17 million in venture funding.

]]>http://fortune.com/2014/05/21/simon-schuster-goes-digital-as-two-startups-score-a-big-five-publisher/feed/0140521095637-digital-books-620xaclyons2014The wrath of the Conhttp://fortune.com/2012/08/03/the-wrath-of-the-con/
http://fortune.com/2012/08/03/the-wrath-of-the-con/#commentsFri, 03 Aug 2012 09:00:52 +0000http://test-alley.fortune.com/2012/08/03/the-wrath-of-the-con/]]>For those who can't wait until the holidays to experience the adventures of Bilbo Baggins on the big screen, LEGO has offered a peek at its upcoming tie-ins. The toy maker is just one of several companies looking to cash in on Middle Earth ahead of the release of the upcoming film based on J.R.R. Tolkien's The Hobbit. Last month the company announced several new products that will be available later this year. Thing is, July is usually a dead zone for toy companies making big product announcements.

What changed? The power of San Diego Comic-Con International. While the annual event for all things sci-fi and fantasy has been taking place since 1970, in recent years it has attracted movie, TV and video game fans who come looking for the latest dish on what they'll be watching and playing in the months to come. It is where directors preview upcoming movies and TV shows. Now, conventions like it have become crucial for companies launching new products as well.

Instead of unveiling all its products at industry only events, such as New York's American International Toy Fair in February, LEGO opted this year to save something for the faithful. "Why you're seeing this paradigm shift is really because of the fans ability to spread news," says Scott Steinberg, principal analyst for TechSavvy Global. "They talk in blogs, post on social media and generally spread the news. That voice is more powerful than ever, so for many companies there is no reason to announce it at a closed event anymore."

As a result fan conventions are now blurring the line with industry trade shows. News that was released in an official press conference with vetted reporters is instead provided — more profitably — directly to diehard fans. It’s a matter of going to where the target audience is says Linda Musgrove, author of The Complete Idiot’s Guide to Trade Shows. "With those products that appeal to the fan base it makes sense,” she says. “At industry shows you get caught up with competitors where at a convention with a core fan-base you can stand out a little more."

As a result many companies are re-evaluating at the convention circuit, whether the various Comic-Cons that are held throughout the United States or events such as this week's QuakeCon video game convention, which has grown in size from around 1,100 attendees in 1996 to nearly 10,000 today. Most are hardcore gamers. Instead of traveling to Europe for a week’s vacation, these fans often drive Dallas, Texas to take part in three days of intense gaming and discussion of gaming.

For video game companies this is practically a captive audience. "Shows like QuakeCon offer fans an opportunity to get their hands on the new games we have coming out," says Pete Hines, vice president of PR and Marketing at Bethesda Softworks, maker of the hit game Skyrim.

While companies go to the shows to generate buzz, conventions have additional advantages. Namely, these aren’t trade shows. With nearly 47,000 attendees at last year’s Electronic Entertainment Expo trade show, it can be difficult for companies to break out. "At traditional trade shows such as the CTIA Wireless Show, E3 and the Consumer Electronics Show many companies are jockeying for attention," says Steinberg.

Still, some of the conventions are now bigger than many trade shows — at least in number of attendees. San Diego's Comic-Con started small, but has steadily grown over the years reaching almost 130,000 attendees. With those numbers it actually only is closing in on the Consumer Electronics Show — the largest trade event in North America — which attracted a record 153,000 in January.

That poses a risk, including long lines, crowded conference rooms and a less time to talk to excited fans about new products. Some companies have begun going to both. "Nintendo has been going to the Comic Cons in San Diego as well as the smaller one in New York regularly and this is part of their marketing," says Billy Pidgeon of M2 Research. "Every year at [QuakeCon], we host a short technology session followed by a crazy and fun fan giveaway," said Bryan Del Rizzo, Nvidia spokesperson. "In July, we did PDX LAN up in Portland, and at the end of August we will be heading up to Seattle to do Penny Arcade Expo (PAX)."

]]>http://fortune.com/2012/08/03/the-wrath-of-the-con/feed/0srivathslakshmiTelling tales with some help from softwarehttp://fortune.com/2012/07/11/telling-tales-with-some-help-from-software/
http://fortune.com/2012/07/11/telling-tales-with-some-help-from-software/#commentsWed, 11 Jul 2012 10:47:56 +0000http://test-alley.fortune.com/2012/07/11/telling-tales-with-some-help-from-software/]]>I'm supposed to be the one asking the questions. But as we chat in front of Tully's cafe in San Francisco’s financial district, Stephen Racunas says to me, "So what's your story?" I shouldn’t be surprised he’s asking. Racunas’ startup, Story Coach, aims to build an encyclopedia of every person's life lessons.

Story Coach is part publisher, part editor, part time-capsule. The service lets people tell a short story to the company, either verbally or written out. Story Coach then turns the yarn into an electronic or physical book. Here's how it works: A customer either phones in, types up, or records and sends in a story. Typically the topics are those pearls of wisdom one picks up along the way of life. The software, which 42-year-old Racunas, the chief company’s technologist, has dubbed Story-Tech, provides prompts to bolster the tale: elaborate here, embellish there, for instance. An algorithm then scrapes the web for relevant historical content — news clippings, pictures, video footage. Then, based on the story and material found online, one of the team's designers creates original illustrations.

(If that sounds a bit like a 21st century version of the oral history, it is. The firm originally sought to partner with StoryCorps, an NPR program that focuses on telling the stories of everyday people and that has been around since 2002. No luck so far.)

The idea was born out of a group project in Design Garage, a class at Stanford's design school taught by David Kelley, founder of legendary design firm IDEO. At Stanford, Racunas teamed up with fellow student Mark Rogers, now Story Coach’s CEO, and designer Jules Sherman and head of sales Zach Osborne. The idea began as a medical project focused on serving seniors. But after some research, they found that potential users’ biggest desire was connecting with younger family members.

So they decided to tweak the plan and start with the segment that presumably has the most stories to tell: grandparents. The team went around to senior centers asking for volunteers. Instead of using the word "senior," Racunas refers to his first costumers as "elders" to designate their wisdom. The company has made about 30 books to date, and plans to sell them for $5 per e-book and $20 per hardcover. They are self-funded, and have raised money for Story Coach by continuing to work on health tech. And someday their storytelling technology could even make tales "smarter" — like changing the plot mid-story based questions from a reader (good, perhaps, for the precocious grandchild who asks "why?" after every sentence).

Storytelling is an ancient practice. Story Coach wants to take it into the future.